Financial planners are often misunderstood. They provide a service that is so important to your financial future, but many people don’t know what they are or how they can help you. This article will answer the question “What is a Financial Planner?” and give tips on when to use one for your personal finances.
What is a Financial Planner?
When you think about your financial future, what comes to mind? Saving for retirement in the form of a Roth IRA or 401(k)? Ensure that you have enough money saved up if something unexpected happens, like a medical emergency or job loss? These are all good things to be thinking about. But there is another level of planning called “financial planning,” and it’s essential when creating any long-term plan for your finances.
Many people don’t know this exists because they aren’t familiar with “financial planners.” And even if they hear about them, many people assume that it costs too much money just to get started. The truth is that not every person needs one, but having at least some basic help can make a big difference in your life.
A financial planner is a fact-checker, accountability partner, wealth manager, and sounding board all rolled into one. They can review your entire financial situation – from your debt to your investments – and make recommendations on what you should do next. Sometimes this includes specific steps like refinancing a mortgage or consolidating credit card debt.
Financial planners help you set and achieve your financial goals. They provide a very important service to the future of your finances and offer valuable advice on how money can work for you instead of against you. Unfortunately, many people don’t know what they are or when these services would be helpful, but we will break it down in this article so borrowers understand their value.
Why do you need financial planning?
Anybody who owns assets such as homes, cars, businesses (small & medium size), stocks/bonds, etc., should use a planner to make sure everything works together efficiently while keeping costs low where possible. Of course, it’s never too late to start planning; however, starting early with someone like a financial planner will make a massive difference in the future.
Financial professionals can help you with tax planning, work towards specific financial goals like retirement or education costs. They can even make sure your estate is set up correctly to go to the people and causes you to care about most after death.
For young adults just starting in life (ages 20-30), a personal financial advisor can benefit you by doing all of the planning. This way, the process is all taken care of and there are no concerns about money!
What do they cost?
Some financial planners work hourly while others charge a flat or monthly fee; however, some will even take a commission on assets under management (AUM). The costs can be as low as $25 an hour or up to several hundred dollars if they manage a large amount of money. Therefore, it’s important to know what you’re paying for and how much it costs so that there aren’t any surprises when the bill arrives at the end of the month/year.
Most planners have a flat annual fee, ranging from $200-$800/year, depending on how much you are willing to pay. If they charge an hourly rate, it will be around the same price as someone with a finance degree (around $30-100/hr).
When do you need a financial planner?
Borrowers should consider hiring one when they are doing any of the following:
- Have assets (home, car, business, etc.) with loan payments; monthly money management is required. This includes avoiding late or missed payments that can lead to repossession and credit damage.
- Receive an inheritance but don’t know how to invest it properly for future income/growth.
- Own rental properties require constant attention due to tenant turnover and other details like repairs & maintenance.
- Want someone else besides themselves paying attention so their savings goals stay on track without input from borrowers about where the money will be spent first before saving for retirement or emergencies. Borrower control over money can lead to unplanned spending and increased debt.
- Are unsure how much is invested in certain accounts like their 401k, IRA, or pension plans (if any).
- Have a hard time saving for the future due to unknown expenses that pop up unexpectedly, such as car repairs or medical bills. They may need help budgeting for this reason since they likely won’t have enough set aside each month without proper planning. This will allow borrowers to know exactly where their money is at all times and ensure that it’s working towards meeting specific goals instead of just going into an account with no end goal in mind.
How to Find the Right Financial Advisors for You?
When trying to find the right financial planners for your needs, there are a few things you can do. First, ask friends and family members if they have used one before, or ask them about what kind of services they offer. If you know where their money is invested, then that’s another good place to start.
A good financial advisor should be able to work with borrowers no matter what their income is. This includes offering financial advice for people who are just starting in the workforce and others who have been working for decades and want to retire someday. If an advisor does not look at clients this way, they may only offer services that don’t fit your needs or poorly execute them anyway.
It would be best if you also took some time searching online financial planning services in your area so you can see reviews from other customers about how much help they received before hiring one yourself. Just make sure any referrals come through friends or family members you trust instead of random websites advertising their names because it’s possible to pay companies money to get positive testimonials added under someone’s name.
A certified financial planner or CFP can be a good choice because you know they’ve studied to get that designation and passed the test. In addition, they usually charge an hourly rate instead of taking commissions like other types, which means there’s less chance for them to push their investments on you over someone else’s (although they’re not allowed to recommend anything at all).
Another way is by looking for so-called “fee-only” financial planners, who charge a flat fee instead of taking commissions from the companies they sell you on (they may still accept gifts and donations, though). These people tend to be more honest with their clients than if they were trying to earn a commission. Again, there are plenty out there that you can find through an online search or referral service.
What are the Benefits of Having a Financial Planner?
There are a lot of benefits when it comes to having a financial planner, but here are some common ones:
- They help you set goals and track your progress
- They save you money by keeping up with the latest tax changes that could affect how much they charge you or what investments may be best for your situation.
- It gives you the confidence that your money is working for you, not against
- You can put your trust in someone else rather than trying to manage it yourself (it’s too much work!)
Common mistakes people make when choosing a Financial Advisor:
Not doing enough research.
You can find a Financial Advisor by asking friends and family members, checking with the local Better Business Bureau for reviews of people in your area, or even on Yelp! If it’s someone who was referred to you personally, then that should be another good sign.
Believing everything they say without question, “Just trust me.”
This is where fee-only planners are better than commissions types – especially if they don’t know each other very well yet or haven’t worked together on previous projects before. You need to make sure this person will betray your trust down the road by doing something you disagree with, even if it means losing you as a client.
Not considering the future.
Some planners might just be focused on short term goals and not give enough thought to things that matter in the long run, like retirement planning or estate/trust documents – which is why it’s essential to have someone who knows what they’re doing when looking at all of your different options because there are so many out there!
In conclusion, a financial planner can make your life much easier by helping you manage your personal finance, saving money where they can for both of you in the process, and give you confidence that you’re doing an excellent job with investing. Of course, it isn’t something everyone needs, but people who have assets to protect should consider using a financial professional at some point in their lives to be on the safe side!